Two US senators have called on American authorities to crack down on the Bitcoin peer-to-peer online virtual “currency” after discovering it’s being used, rather like greenbacks in personal transactions, to buy drugs anonymously.
Bitcoin gold coin logo Bitcoin uses a decentralized model: users exchange Bitcoins directly …

Put simple, the US senators have be bought

@"Two US senators have called on American authorities to crack down on the Bitcoin"

... That should be ...

"Two US senators have be bought by the American banks to crack down on the Bitcoin"

Bitcoin threatens the banks (i.e. some of the most rich and powerful government puppeteers).

Bitcoin also threatens the people who want to spy on money transactions.

Bitcoin also threatens the people who want to find ever more new ways to tax and skim money & transactions for the rich and powerful's pockets. Grow this department, outsource this department, its a never ending bean feast for government and the rich and powerful. (Just look at how much they could find when they wanted to throw hundreds of billions at the banks and we are going to be effectively taxed for years to pay for that as well ... and now they have set their greedy sights on Bitcoin).

So suddenly we get the US senators saying Bitcoin must be evil as people buy drugs anonymously. No, Bitcoin is pissing off a lot of rich and powerful people and they don't like that and they want something done about Bitcoin. All this drugs talk is short hand two-faced-bastard-speak for implying Bitcoin is evil and must be stopped, because really they want to stop Bitcoin.

If Bitcoin is pissing off these greedy, two faced, power hungry, bastards that much, I think I should take more notice of Bitcoin in the future.

WOW, seriously?

Bitcoin doesn't threaten anyone, it's a niche attempt at a currency that's going to fall flat on its arse.

Leaving aside the built in hyper-deflation, bitcoin is no threat to anyone that wants to spy on transactions or tax you because (and this is if it isn't flat out banned) -

1 - It stores the details of its provenance, certainly the last transaction. Unless you launder it. There's a good reason money laundering is illegal in the real world. Expect it to become so online also.

2 - You will be taxed if you have significant bitcoin income, one way or another. There are only two certainties in life, death and taxes. Never forget this.

But a threat to existing interests? Sorry but that's laughable. Worst case for bitcoin is that it's made illegal. Not because it couldn't survive, but because the numbers of people needed to keep it useful wouldn't be there.

Wake up!

"I care not what puppet is placed on the throne of England to rule the Empire, ... The man that controls Britain's money supply controls the British Empire. And I control the money supply." --Baron Nathan Mayer de Rothschild (1777-1836) ... (Nathan Mayer Rothschild was a London financier and one of the founders of the international Rothschild family banking dynasty).

Money is power and Nathan Rothschild knew this and became hugely rich and powerful because of it. Anyone who controls the money supply controls the empire as he said. Bitcoin is a direct threat to power and a direct threat to the rich and powerful. Also that threat is growing as Bitcoin grows and Bitcoin is growing. Everything starts small.

Also the state doesn't operate like a business where it generates an income to support its activities like a service, it operates like a protection racket, where it skims income off everyone else backed up with punishment if you fail to comply. Also the state chooses how much it will extract from everyone and that continues to increase (e.g. vat). Also we have all been brought up to believe in taxes of various kinds from birth without looking closely at how state money is really obtained and used and how unaccountable it is to the people over time. The way hundreds of billions of our money was given to the banks is proof of this. All that money is really unaccountable to us (we didn't have a say in our money being given to the banks) and now we must spend years still paying back for all the greed of the banks (so in effect, its another form of tax), whilst they live the high life and continue to take home huge wages (literally at our expense) and the Nathan Rothschild's of our time are probably laughing at our expense (literally).

Look, I object to high taxes as much as the next fella

And I'm as suspicious as anyone else as to what the government spend it on.

However, for bitcoin to be taken seriously as a threat to entrenched interests, it would have to be able to be taken seriously on a large scale by a wide selection of the population. I'm quite comfortable predicting that it won't be.

Add to that that making bitcoin transactions and conversion into 'real' money illegal acts would be both easy as a stroke of a pen and effective in massively reducing the potential audience and therefore its viability as a currency. No, it's not a threat to anyone.

A real popular movement with a replacement currency that was actually viable, sure. Bitcoin, no.

As for your Rothschild quotes, well you may want to think about applying them to the early adopters and their very profitable early mining activities. They may not control the currency, but they sure as hell made sure they got the lion's share of it early on.

Taxation

"Bitcoin also threatens the people who want to find ever more new ways to tax and skim money & transactions for the rich and powerful's pockets."

Taxes apply to the rich and powerful too. Indeed, taxes are a very effective tool to take from those that have money and finance services that benefit everyone (look up the word 'welfare state' if you need clarification). If you destroy the ability to tax, you'll end up with cutthroat capitalism verging towards a feudalistic entrenchment of those who control the capital.

I personally don't care what we call the bits and bytes on my credit card, as long as they are widely accepted.

The current money systems are profoundly corrupt.

@David Hicks, "Add to that that making bitcoin transactions and conversion into 'real' money illegal acts would be both easy as a stroke of a pen and effective in massively reducing the potential audience and therefore its viability as a currency."

Bitcoin is therefore still a threat to them, because they will act to stop it. If it wasn't a threat, they wouldn't need to act. As much as you don't like to admit it, Bitcoin is a threat but one they will not allow to grow, but it is still a threat.

@David Hicks, "They may not control the currency, but they sure as hell made sure they got the lion's share of it early on."

The rich and powerful always want in on the latest ways to make money, so they can also share in its riches as well.

Are you learning yet? ... Who is really paying the taxes, as these companies are evidently not.

@Schultz, "If you destroy the ability to tax, you'll end up with cutthroat capitalism verging towards a feudalistic entrenchment of those who control the capital."

Oh yes the old take it to an absolute absurd extreme and then attack that absurd extreme. In other words, you are using a straw man argument.

The money systems are profoundly corrupt. Not just a bit corrupt, they have centuries of entrenchment into our society, so they can leach money out of all of us in so many ways. That is what has to stop, but its fools like you who prevent that happening, as you argue against change to the system. So what do you really support? Therefore even though you deny it, it looks like you really want the cutthroat capitalism, because you don't want it to change.

for now, yes, but 20-30 years on?

"it would have to be able to be taken seriously on a large scale by a wide selection of the population." For now, sure, but in 20-30 + years time there will be whole generations brought up knowing that there is little distinction between virtual and real. It's not a big step to take. All it takes is a couple of big online retailers to start accepting bitcoins and it can take off real fast.

For your second point "making bitcoin transactions and conversion into 'real' money illegal ", yes it's easy to sign into law, but absolutely impossible to police, so bitcoin could not be stopped like this if it had reached a critical mass of users which I propose that it could if left unchecked for 20 years. That's why they're trying to legislate against it now, to head it off before it has a chance to become a mainstream currency

Taxation FAIL

"Taxes apply to the rich and powerful too" erm, only technically. The rich and powerful mostly make money through capital gains investments (taxed at 15%), or through business ventures (taxed at approximately 25%, but taxed on profits, not income). they can also hire the best lawyers and accountants to dig up obscure loopholes in tax law, hold money in offshore jursidictions etc. Rich and Powerful people really pay, bottom line, around 10% in taxes. The brunt of taxation everywhere is borne by middle class salaried employees such as yours truly, who cannot hide their income, and whose tax is taken straight out of their pay packet.

I agree that bitcoin doesn't really threaten the rich and powerful. What would threaten them is (a) a more educated population and (b) a tax system with just 3 bands and zero exceptions (otherwise known as tax credits), and with no distinction on earned, business, dividend, capital gains, inheritance etc, but where all income is considered equivalent.

Spoken like a True Believer

"...even though you deny it, it looks like you really want the cutthroat capitalism, because you don't want it to change."

Currencies are defined top-down, not bottom-up; you don't get to decide what currency people use unless you are sovereign, which is unfortunate for you lot because the very concept of sovereignty is what you want to tear down.

It's not that sensible people find cutthroat capitalism appealing, at least not unless they're getting the benefit; it's that the argument you're advancing, that people where you live should be able to define and use their own alternative forms of currency without government interference, is utterly without meaning -- neither right nor wrong, but roughly as senseless as arguing that the sky should be green-and-orange paisley -- until you first succeed in tearing down your existing system of government and replacing it with one which suits your ideology. Until you can see a clear way of doing that, you're just wasting everyone's time. (And if you *do* find a clear way, please do all the rest of us the courtesy of offering enough warning ahead of time so that we can get the hell out of the country before you turn it into another Somalia.)

Still not a threat

Anything that can (and will) be squashed with a simple law is no threat.

Maybe you and I see the definition of the word threat differently. Whilst it does have claws and teeth, I wouldn't consider a housecat a threat. In the same way I don't think anyone would see bitcoin as a threat. It's not only.

If you want to change taxation, if you want to reform the monetary system (and this meme does seem to be growing), if you want to reduce the control that the government has over everything, these are not bad aims. Picking up a new currency, especially a flawed one, is not going to work without associated political reforms.

And I'll repeat - it doesn't matter what currency you use, the government can and will find a way to tax you.

Yup, interesting idea but fundamentally flawed, IMHO

Over a third of all the bitcoins that will ever exist are already in the hands of a very few people. In the theoretical situation in which bitcoin actually goes into wide use, these people get to be instantly rich due to massive deflation, because no matter how many people join in, the rate of new bitcoins being created is held constant, approaching a limit somewhere around 21 million.

Massive and continuing deflation will not only make these current holders of bitcoin rich, but will also mean that nobody spends them. If the value of currency is going to be more tomorrow than it is today, why hold on to it?

In a 'real' currency this isn''t as much of a problem, because people still have to eat and therefore spend. Bitcoin is not going to be anyone's primary currency in the mid term though, just a secondary.

So what should sensible folks do now? Probably, I think, mine some bitcoins and hang on to them for a while, just in case ten years down the line the deflationary disaster has somehow been averted and 1 bitcoin is suddenly worth a million quid....

More Then Meets the Eye

Bitcoin is so much more. It provides an alternative to our failed fractional system. Black Market, also called Dark Trading, is just a small fraction of the exchange. In fact im willing to bet 10 BTC on that =)

Bitcoin provides a free, secure, and fun way to handle money. In fact it provides a untraceable, universal economy, that is not taxed or control by centralized groups of rich bankers and corporations.

Bitcoin is the currency of the people, and i believe in the United States it should be protected under the 1st (Free Speech) and 4th (Illegal Search And Seizure) Amendments.

Good luck trying to reverse engineer 130000 blocks of billions transactions encrypted at 256bits distributed on millions of computers globally.

Want to know why it doesn't have a chance in hell?

"In fact it provides a untraceable, universal economy, that is not taxed or control by [governments]."

Fixed that for you. The problem you have is that governments also have a monopoly of force, which means that if Bitcoins gets annoying enough, people with firearms and lousy dress sense will be along to retrieve the servers and possibly imprison the people who've been running the whole shebang, and any damnfool who's sunk real money into this nonsense will be SOL and probably lucky not to end up in jail themselves.

Do I like that? Not even a little bit. Is it nonetheless the fact of the matter? Yes. You're not going to back-door anarchism in that way. Why am I so confident? Because it's been tried a couple of times in the history of the US, not least by Lysander Spooner, and the federal government stamped it out like the threat to sovereignty it was.

sounds like a

@Edge

Hmmm

"... early adopters were able to amass more coins more quickly than today’s user; and, if the network continues to grow, today’s user will amass more of the currency than someone who joins the network two years from now. This gives all current users a vested interest in promoting the system to the next round of participants."

Stuck in the pyramiddle with you

Except that by encouraging new people to join, they're actually _reducing_ their chances of creating the next batch of coins. If they kept this just among a small group of people, all the coins would go to that small group. The more people are added, the more widely distributed the generated bitcoins.

Adding new people to the bitcoin network doesn't magically make new bitcoins flow "up" to the top of some pyramidal structure. There's no "entrance fee", "subscription", or suchlike, to pay to some higher-ups. Any new coins created by this week's latest bandwagon-jumper will stay with that person until they decide to spend them on something (or lose them down the back of the defragger, more likely).

Adding people ups the value

Or haven't you noticed?

And therefore those that already have bitcoins get better off the more people that use it. Not because they get more bitcoins, but because they have more bitcoins already, and the new miners can't make anything like the same amount as the production rate of coins drops sharply over time.

Euro?

Exactly the same accusations could be aimed at the Euro - it can be used to buy drugs and the early adopters had a vested interest in getting other countries to join so that the currency became more "legitimate" in the markets. Even if that meant allowing countries like Ireland, Greece, and Portugal in when they weren't even near ready.

Ponzi scheme

Some time next year

Some time next year, or maybe the year after, the internet commentards will be wondering how anyone could be so dumb as to spend ever increasing amounts of real money on some magic numbers, where proof of ownership is on some random stranger's botnet-infested, virus-ridden computer.

It is not registered with the FSA as an electronic money issuer, which means that a) it is illegal, b) there is no one to complain to if things go wrong, c) there is no capital backing, and therefore these magic number are not worth the paper they aren't written on.

The hyper-deflation it is currently experiencing means it is completely unsuitable as a store of value. You might be quite happy for example to sign a 24 month mobile phone contract for $30 per month, but would you sign one for the current equivalent of 1 bitcoin per month when you have no idea what that might be worth next week, never mind in 2 years time.

That means that the only use for these magic numbers is as a speculative bubble instrument, much like ostrich eggs or tulip bulbs, except that unlike magic numbers, at least those ones had some nominal intrinsic value.

First, let me assure you...

In Soil We Trust

Rather than "in God we trust" on dollar notes, "in Soil We Trust" is appropriate for a recent Slow Money currency. Bitcoin has little trust built into it but will springboard underground local currencies that may well facilitate exchange of substances but especially trading local food. Hard currencies are inherently unstable but local fluffy currencies can help build communities.

P2P money

The worry for them surely, is that control of the money would no longer be theirs. They can see control of cash slowly bleeding through their fingers. Imagine the banks being relegated to the same position as telcos will be, just providing an endpoint.

Much like the control of music and movie distribution bled through the fingers of their respective 'organisations'

jonathanb 'Barter is taxable'; only if it's in your jurisdiction, this has never been tried before.

Although it's inevitably going to fall on it's arse, it's interesting as a scenario for a capitalism end-game. One the senate has obviously played; and lost.

Hopefully at the very least, it'll dislodge the banks from their lofty perches.

Re: P2P money

It may[*] replace banks for the provision of transaction services and money transmission, but it won't replace the actual banking bit of what they do. People will still need to borrow money to set up businesses, build houses and so on, and people will still need to save up for retirement, a deposit on a house, emergencies etc, and we will still need banks for that.

[*] Let's just assume for this part of the argument that bitcoins will work, even though they won't.

Recently I exchanged an old, barely working car with 2 weeks MOT remaining + some cash for a new car. That is a barter transaction, and a very common one. It most certainly has been tried before. Once you establish that it is a purchase and sale running side by side, and agree the value, it works exactly the same as two cash transactions.

My reading of the law is that bitcoins are already illegal, and it is primarily the miners that are breaking the law by not registering as electronic money issuers, not keeping appropriate reserves to cover redemptions of their magic numbers, not employing "fit and proper persons", not having complaints procedures and so on.

@jonathanb

You have misunderstood how bitcoin works.

Technically (and legally) bitcoin isn't a currency in the literal sense of the word, but more like a collectible or commodity.

Bitcoins aren't "issued" at all. That is simply not how the system works. The purpose of miners is NOT issuing money or backing it, their purpose is confirming transactions - nothing more. Even the block reward is just a transaction from void TO the miner, in order to bootstrap the initial distribution of wealth.

According to your logic, gold mining companies would also be illegal because "they are not registered as money issuers".

Govs will love it when....

They are able to trace financial transactions at will as they do with banks.

That is the only reason Govs don't like it, because it takes transactions into the dark from their point of view. Remember cash is 'suspicious' if you're carrying enough of it but if you have the same amount in a bank account the gov can trace it's not an issue.

If you're doing something with money the gov cannot track then you are behaving suspiciously by default. Privacy itself is pretty much 'suspicious activity'.

Ponzi????

"as more people exchange national currencies for Bitcoin, the value of one Bitcoin rises"

In what way is this different from any other currency? If there's a higher demand, value rises. It can't be considered a Ponzi scheme simply because early adopters see the value of their existing bitcoins rise as more people buy in. I doubt that new bitcoin users are signing up to bitcoin simply because they expect the value of the bitcoin to rise.

In a true Ponzi scheme, new entrants are promised a payoff, and said payoff does not come from the wise investing of their entry stake, but by the entry stake of the most recent entrants. For example every single social security scheme in which current pensions are paid by the contributions of current workers ( as opposed to being paid from the returns on investment of the contributions that the pensioners paid in when THEY were working) is a Ponzi scheme.

And I sure as hell would prefer to use a currency whose supply is predictable based on an algorithm rather than have the central bank of a quasi-bankrupt country trash the value of my existing currency by printing billions in new currency that doesn't have any value to back it up.

So thumbs up to Bitcoin, thumbs down to teh senators wanting to stop it, Fail to whoever is likening bitcoins to a Ponzi scheme, and a beer for me :)

Banking

jonathanb, it's true that we would need organisations to lend money for various reasons.

They wouldn't have to be banks though. I'm thinking more about bankers using interest accrued on my transactions to speculate on the overnights, while at the same time asking me to bail them out when they fuck up.

In your car trading scenario, you're bartering (presumably) in the same country and are therfore subject to that country's laws for the purposes of the exchange.

Movie companies tried to control their markets through region encoding and, as far as I can see, were unsuccessful.

And 'I promise to pay the bearer on demand' might sound good, but as evidenced by our bailing out of the banks, THEY don't keep appropriate reserves to cover redemptions of THEIR magic numbers.

Maybe that should read 'THEY appropriate reserves to cover redemptions of THEIR magic bonuses' :p

Re: Banking

Well the bank money was secured on mortgages to trailer dwelling welfare recipients in Detroit. That clearly is a pretty dodgy security. Bitcoins are secured on the say-so of some random stranger's computer on a p2p network. Not something you can cash in at all. Given the choice, I'll stick with the trailer dwelling welfare recipients.

I had money in Anglo Irish Bank and Royal Bank of Scotland, and thanks to the FSA and the Irish equivalent, I still have that money. Just because the "light touch" regulation didn't work very well doesn't mean you can improve things by removing it altogether.

Doing cross-border barter transactions is no different to doing a pair of cross-border cash transactions. It really is not a problem for the tax authorities.

Actually

if my understanding of it is correct Bitcoin is secured by the say so of at least half of the p2p network. At this point you would have to get tens of thousands of clients to agree to let you rip it off. That's a hell of a lot more secure than what banks depend on.

Here's what your're missing

At least in the US I can barter all day long and keep the IRSs grubbing hands out of my personal transactions. Like our Income Tax, this was used for Businesses, not individuals. Everyone wants to argue you have to pay - but frankly, I barter as much as I can.

The ONLY reason a Government is panicking about some media like this, is because THEY control the currency and this can regulate, track, and tax you!

So, Bitcoin is a direct FINGER to all of the institutions. Not only will I use Bitcoin and accept it, I encourage it. Once our Government shows me that I can trust them with our taxes, I won't have to go to these extremes. Problem is, we're trusting less but giving more.

Assassination Politics

This reminds me of an essay I had read some 10 years or so ago. Anyone remember Jim Bell and his Assassination Politics? If I remember, quite a few in gov't and law enforcement got real worked up over this idea. heh, wonder why...

Do none of you know what Tor is for?

To take part in the bitcoin discussion, you need to understand one thing: where other currencies are secured on gold, or real assets, or are unsecured and based on trust, Bitcoins are worth money solely because they can be used to purchase child pornography. That's right, it's a currency which uses the kiddy-porn standard. AVOID LIKE THE PLAGUE.

Yeah, let's encourage the growth of this

...and watch as mega corporations stuff their money into Bitcoins, trade in Bitcoins and avoid paying any tax to the gov whatsoever. The rest of us plebs dealing with real currency will have to deal with the shortfall. Tax rates don't fall because tax revenues decline, they rise. Digital commodities with a universal value aren't a loophole in the tax system, they're a gaping bottomless pit.

All that noise (again)

It is interesting to note that the vast majority of comments and, more importantly, the article itself, show evidence of the writers not being in the least familiar with the Bitcoin white paper[1], which already covers most of the points raised here.

It's not a matter of being for or against something. It's more a matter of doing a minimum of research before opening one's mouth, if one really feels one has to opine.

By the way, Mr. Chirgwin, are you referring to Her Majesty's Revenue and Customs? If so, it's a "J" in Majesty, not a "G".